In Asia » Economic Developmenthttp://asiafoundation.org/in-asia
Weekly Insight and Features from AsiaMon, 02 Mar 2015 21:56:55 +0000en-UShourly1http://wordpress.org/?v=3.9.3India Under Prime Minister Modi: A Conversation with Ambassador Kathleen Stephenshttp://asiafoundation.org/in-asia/2015/02/25/india-under-prime-minister-modi-a-conversation-with-ambassador-kathleen-stephens/
http://asiafoundation.org/in-asia/2015/02/25/india-under-prime-minister-modi-a-conversation-with-ambassador-kathleen-stephens/#commentsThu, 26 Feb 2015 00:57:11 +0000http://asiafoundation.org/in-asia/?p=20236In Asia editor Alma Freeman sat down with Asia Foundation trustee Ambassador Kathleen Stephens, who visited Asia Foundation headquarters in San Francisco having just concluded a 7-month post as chargé d'affaires at the U.S Embassy in New Delhi.]]>In Asia editor Alma Freeman sat down with Asia Foundation trustee Ambassador Kathleen Stephens, who visited Asia Foundation headquarters in San Francisco having just concluded a 7-month post as chargé d’affaires at the U.S Embassy in New Delhi. Ambassador Stephens served for 35 years as a career diplomat, including as U.S. Ambassador to Korea. She discussed President Obama’s recent visit to Delhi, Prime Minister Modi’s leadership priorities, women’s security, and regional opportunities.

You arrived in India moments after a lively election that brought in new leadership under Prime Minister Modi. What are your thoughts on the election, and what opportunities and challenges does new leadership bring?

In April of last year, after I thought I had finished my diplomatic career, I was certainly surprised when I received a phone call from Washington asking me if I would be willing to go to India to lead our diplomatic mission there until we could get a new ambassador named. Modi was sworn in at the end of May and I got there the first week of June. The election demonstrated that the Indian electorate was ready for a change, and while a Modi-BJP victory was expected, what was unexpected by all sides was that he would win an outright majority. Indian pundits and political thinkers had assumed that India would go forward with a period of weak coalition governments, but in fact Modi won a majority, and he won on a platform of hope and change, appealing to younger Indians’ desires for greater opportunity and renewal of economic growth.

When I arrived, India-U.S. relations had been going through a period of some strain. Over the last seven months, the Modi administration and the U.S. government have stepped up in building their relationship. The U.S. is finding ways that we can support Modi’s stated goal of reinvigorating the economy and India playing a larger role in the region. President Obama said several years ago when he visited India the first time that the U.S.-India relationship is one of the defining relationships of the 21st century. But for India to reach its potential and to play the role as the world’s largest democracy it needs to have the kind of sustainable development and economic growth that is going to create a million jobs a month – which is what they need to sustain a very young population coming onto the job market, and to address some of its massive developmental challenges – from climate change and sustainable water and power, to infrastructure and education. Across the board we feel like the U.S. can play some role in that, and clearly so do Prime Minister Modi and the Indian people.

You played a major role in orchestrating both Modi’s visit to the U.S. and Obama’s visit to Delhi. What are some of the key takeaways from those visits?

We’ve really only just started on what we can do together, and Modi’s visit to D.C. in September and Obama’s visit to Delhi in January – the first U.S. president ever to visit twice during his presidency, demonstrates that we’re in a period of renewed commitment to work together.

It was particularly striking in the current tense environment in Washington for me to see the real attention and importance that people from across the political spectrum attached to this effort to respond to Modi’s initiatives with initiatives of our own.

Obama’s visit was momentous in that he not only went on an invitation from the Indian government, but that he went to their signature event for the first time, Republic Day. That is one of these very special events that you only invite your special friends to, so the Indians viewed it as a demonstration of the importance of this relationship.

In this context, what steps need to be taken for India to address some of its biggest challenges?

Going forward, first and foremost, it’s the economy. Prime Minister Modi’s and the people who elected him understand that very much. In his first seven months, I think Modi has done a superb job managing his foreign relations, not only with the United States, but also with Japan, Australia, and India’s neighbors. Now he’s turning his attention to a very difficult and ambitious program of reforming the Indian economy and of building infrastructure – roads, energy, housing, water, hygiene, education. Across the board India’s challenges are immense – I can’t find a word large enough. For all of the areas of progress over the last several decades – it has a huge middle class and huge world-class companies – the country also has hundreds of millions of people without access to reliable power and huge problems of over-regulation. Modi is encouraging investment through his “Make in India” campaign, but creating the conditions for that investment is challenging. They’ve taken some steps: allowing for more foreign investment, and making it clear that they welcome foreign companies coming in to be partners in defense and manufacturing. But they still have to show some success. Once you have success it will build on itself, but the next year or so will be very important.

How things go in India is going to have a huge impact on not only the almost 1.3 billion people in India, but on the whole world. The human capital in India is tremendous – to the extent that we’re going to find solutions to these issues that transcend borders – climate change, gender violence, inequality – we have to bring our best approaches to bear. The most creative solutions are not going to come from the two governments working together in the first instance. We must find partners where we can work together and come up with approaches that can be scaled up in India and the region. For example, India could be where we see the possibility of large-scale solar come to be – but it’s not something India can do on its own. It will take that a combination of business, environmental groups, energy experts, and government policy and regulation to make that as scalable and as it needs to be to address the needs.

Women’s security is a major concern across India, and was a top issue during Delhi legislative elections this month particularly on the heels of a number of high-profile cases. What are your thoughts on this?

Even within India, I think people recognize that Delhi was a place that was considered particularly problematic when it came to violence against women, not just because of these high-profile cases, but also because of a general sense of lack of security. In part because of these high profile cases, the issue of violence has gotten people out talking about it more openly. I went to see Modi give his first large policy address on August 15 on Independence Day at the iconic Red Fort. He is known to be a master orator, and he spoke without notes for over an hour in front of a crowd of tens of thousands of people. What was striking to me was that he devoted so much of that speech to talking in very plain, and apparently unscripted language, about issues like rape, selective abortion of female fetuses, violence in general against women, and discrimination. He also talked about the fact that parents need to think about what their sons were doing, and not just their daughters. It was extraordinary – I’d be surprised to hear any politician in any country talk in such direct terms about these issues. More importantly, when I went home I turned on the TV and the place was abuzz. Now how do you take that forward? The police have announced some positive steps and the government has made some commitments to changing mindsets and provided more security. But this is a very entrenched and difficult issue. This is an area where non-governmental players in India – and there are many – can play a big role.

]]>http://asiafoundation.org/in-asia/2015/02/25/india-under-prime-minister-modi-a-conversation-with-ambassador-kathleen-stephens/feed/0A Conversation with KDI’s Joon-Kyung Kim on Korea’s Growth Potentialhttp://asiafoundation.org/in-asia/2015/02/25/a-conversation-with-kdis-joon-kyung-kim-on-koreas-growth-potential/
http://asiafoundation.org/in-asia/2015/02/25/a-conversation-with-kdis-joon-kyung-kim-on-koreas-growth-potential/#commentsThu, 26 Feb 2015 00:55:18 +0000http://asiafoundation.org/in-asia/?p=20247Last week, Joon-Kyung Kim, president of leading economic policy think tank, the Korea Development Institute (KDI) and the KDI School of Public Policy and Management, visited The Asia Foundation’s headquarters in San Francisco for a signing ceremony to extend the Memorandum of Understanding (MOU) on “South-South Development Cooperation Dialogue” between KDI and the Foundation (read more about this partnership). Asia Foundation incoming country representative in Korea, Dylan Davis, spoke with Kim during his visit about Korea’s economic potential and challenges, an aging population, and the role of innovation in advancing the country’s reforms.

Since taking the helm of KDI in 2013, what are some examples of the biggest opportunities and challenges to achieving the Institute’s goal of creating greater prosperity for Korea?

Korea’s economic growth rate has been on a declining trend in the last 10 years, falling to 3 percent in 2013. So Korea is in a low-growth period. This is an economic fact. We have not entered a deflation period like Japan, but I believe there is a high risk of Japan-style low growth. So the number one policy priority is restoring Korea’s growth and prosperity.

How can Korea increase its growth?

I believe the key is real structural reforms. Without reforms, we cannot realize the benefits of monetary and fiscal stimulus. If you look at the Korean case after the 1997 Asian Financial Crisis, Korea’s economy rebounded rapidly after major reforms in the financial and corporate sector, and companies like Samsung and Hyundai became internationalized. The 1997 crisis was very painful for Korea. Many companies went bankrupt and many people lost their jobs, similar to the U.S. after the 2008 global crisis. Similarly, the U.S. economy is starting to grow after years of economic and social restructuring. And the opposite is true in Japan where there have been no reforms and no growth, only large monetary and fiscal stimulus.

What kinds of structural reforms?

In the short-term, I think we need to restore entrepreneurship and risk-taking by reforming the SME sector to promote job creation and growth. This means implementing a fair and competitive system for promoting SMEs. By competitive, I mean supporting innovative and profitable companies while exiting unprofitable companies. By fair, I mean regulating monopolistic behavior and providing access to finance and markets so that smaller companies can compete and grow.

I also think it is critical to upgrade Korea’s R&D. Samsung and Hyundai invest billions in R&D, and that’s why they remain competitive and innovative in the global market. These companies have established their own basic science R&D capacity. However, Korean SMEs, and even large-sized companies, do not have the resources to invest in R&D. Moreover, there is very little linkage between Korean companies, public research institutes, and universities. So it is difficult to make innovation happen and to produce globally competitive products. For the Korean economy to grow and to create jobs, Korean companies need to stay competitive and profitable.

In the longer term, I believe that reforms such as changing the seniority-based pay system and changes in education that promote 21st-century methods like project-based learning are important. We also need to address governance reform in Korea to ensure better policy results. In Korea, confidence in government and the political system is relatively low compared to other OECD member countries. So the government must take a leadership role in improving governance and upgrading key legal/regulatory, social, and political institutions.

Speaking of challenges, a recent pioneering study conducted by KDI showed that South Korea’s rapidly aging population could steadily weaken the country’s growth potential. What are your thoughts on this?

Korea’s rapidly aging population is the biggest challenge, with huge social and economic impact. Korea has a very high elderly dependency ratio. In 12 years, the elderly population will make up 20 percent, which will be greater than Japan. A little known economic fact is that nearly 50 percent of adults in Korea over the age of 65 live in poverty. This is a major social issue that needs to be addressed before it is too late. Many countries are dealing with the impact of aging. So there are a lot of policy ideas and research around this issue. However, there hasn’t been much success in slowing the impact of aging on the economy, besides expanding the welfare system (Japan and Europe) or opening the country to immigration (U.S. and Singapore). These are policy choices Korea will have to consider. I also think we need to do more research on aging and establishing a welfare system that works for Koreans and is designed by Koreans.

In 2010, Korea became the first Asian country and the first non-G-7 member to host a G20 summit. How do you think Korea’s role as an industrialized economy has changed in the five years since then?

Hosting the G20 summit was a great achievement for Korea. I don’t think Korea’s economy has changed much in last five years. However, I think Korea’s role and responsibility in the international community has increased significantly, especially since the Seoul G20 sought to promote a new approach to development – The Seoul Development Consensus for Shared Growth. Korea will have to show more leadership in achieving greater cooperation among countries to promote a development framework that is more collaborative, more inclusive, and broad-based.

The Asia Foundation and KDI have a very special relationship. In Seoul in 2010, KDI and The Asia Foundation jointly hosted the first in a series of dialogues focusing on Asian approaches to development cooperation in the lead-up to the 2011 Fourth High Level Forum on Aid Effectiveness (HLF-4) in Busan, Korea. As the aid landscape changes dramatically and Asian donors play an increasingly larger role in aid delivery, what do you see as Korea’s unique role in improving aid effectiveness throughout the developing world?

Being a country that went from an aid recipient to an aid donor, Korea has a special place in history and the world. I firmly believe Korea can promote greater development cooperation and effectiveness by playing the role as a bridge between North and South countries. Korea can also play an important role in facilitating knowledge sharing. Today, development aid is increasingly knowledge-driven, and Korea has many valuable lessons and experiences from its development that we can share with developing countries.

Seoul is often called the world’s most connected city and is a trailblazer for finding innovative approaches to green development. What lessons can Korea’s capital offer other cities across Asia and the world?

I think Korea can help to address green growth issues and climate change by playing a bridge role between rich and poor countries, such as through the Green Climate Fund (GCF) and Global Green Growth Institute (GGGI), which will be located in Songdo. Songdo was developed as a “smart city” that uses new technologies and designs to promote more green and sustainable development.

Can you talk about how innovation plays a role in shaping Korea’s social and economic future?

Korea has made many innovations in technology, culture, and society. But Korea has to do more to promote its capacity to innovate. Korea still has a strong dynamism and entrepreneurial spirit; people want to work hard and be number one. But we need to create an environment that rewards hard work and innovation and promotes job creators instead of job seekers. This means promoting an education system that gets our students ready for the 21st-century economy that rewards knowledge and innovation. This also means improving governance to make sure everyone plays by the same rules of the game.

While Korea’s development success is often held up as a model for developing countries, much like other countries in the region, it struggles to address rising inequality of income and wealth, which some warn could lead to greater societal instability. Can you talk about what this inequality looks like in Korea today, and describe some examples of ways that Korea is working to address this challenge?

At this time, this is a big social and political issue rather than an economic issue in Korea. After 50 years of rapid development, Koreans are enjoying a higher standard of living. And Korea’s rapid development was relatively broad-based due to the policies like rural community-driven development (Saemaul Undong) in the 1970s. Since the 1990s, Korea’s income inequality has worsened significantly, particularly after the 1997 crisis. Compared to other OECD countries as measured by Gini Coefficient, Korea’s income inequality is relatively high. This is largely due to the decline in the competitiveness of SMEs, which pay lower wages. And if we assess distribution by including wealth such as real estate and financial assets, economic inequality becomes much bigger. This is very much in line with Thomas Piketty’s argument. In addressing economic inequality, KDI advocates establishing a targeted and fiscally efficient and sustainable welfare system that helps the most impacted, and promoting job training and education programs that give workers the skills demanded in the marketplace. For me, I would like to see a balanced approach to addressing social inequality, because too much welfare or equality can also decrease incentives for hard work and innovation.

]]>http://asiafoundation.org/in-asia/2015/02/25/a-conversation-with-kdis-joon-kyung-kim-on-koreas-growth-potential/feed/0Timor 2.0: Reinventing a Republic through Resignations, Reshuffles, and Resiliencehttp://asiafoundation.org/in-asia/2015/02/18/timor-2-0-reinventing-a-republic-through-resignations-reshuffles-and-resilience/
http://asiafoundation.org/in-asia/2015/02/18/timor-2-0-reinventing-a-republic-through-resignations-reshuffles-and-resilience/#commentsWed, 18 Feb 2015 23:32:56 +0000http://asiafoundation.org/in-asia/?p=20218By Susan MarxWhile Japanese prime ministers in recent history have done so with unusual regularity, to voluntarily relinquish the post of prime minister anywhere in the world remains an unusual transition strategy. Yet, this is precisely what occurred in Timor-Leste...]]>By Susan Marx

While Japanese prime ministers in recent history have done so with unusual regularity, to voluntarily relinquish the post of prime minister anywhere in the world remains an unusual transition strategy. Yet, this is precisely what occurred in Timor-Leste earlier this month with the resignation of Xanana Gusmao, the leader of the country’s drive for independence and first president. Less than one week after the announcement that the former health minister and deputy prime minister, Dr. Rui Maria de Araujo, would succeed the former guerilla fighter as prime minister of Timor-Leste, and thereby complete the mandate of this government, critics were still pondering the reasoning why a seemingly selfless civil servant would actually submit himself to becoming a bona fide lame duck prime minister. Until he delivered his inaugural speech on Monday, that is.

In citing some of the ongoing challenges facing Timor-Leste today, including its enormous dependency on oil, abject poverty, weak education system, and persistent domestic violence, the new prime minister made it clear that he will hold members of government to a higher standard than they are used to. Photo/Molly Mueller

After months of intrigue and speculation on who’s in and who’s out, Timor-Leste finally emerged with a new, streamlined government led, for the first time in its 13 years of independence, by someone other than a key member of the resistance or “75″ generation. On Monday, the Sixth Constitutional Government, led by opposition party member Dr. Rui (as he is popularly known), was sworn in, which, despite months of speculation, surprised many, largely because of Gusmao’s immense popularity.

While there are many familiar names on the roster of the new government, noticeably absent from the top slots are Gusmao, Horta, or Alkatiri. However, one should be cautious in interpreting this as a complete relinquishment of power to the oft-cited younger “99″ generation,” a reference to Indonesian occupation ending in 1999. Rather, this is at best an experiment in a “phased transition.”

A critic might say it is a sneaky way for Gusmao, a fervent leader but mediocre manager, plagued by allegations of nepotism, political interference, and corrupt government members, to maintain a firm hand over the country’s financial and natural resources as well as strategic decisions, without any of the messy business of actually having to manage the government. Some suggest that with Gusmao as the country’s inaugural Minister of Planning and Strategic Investment, very little real change will be evident in the government of the incoming prime minister, and Gusmao will, in fact, remain in charge. This assumption is strongly supported by the fact that the entire list of the new government was drafted by Gusmao and not the incoming prime minster.

On the other (more optimistic) hand, the fact that Gusmao recommended a replacement widely heralded for his technocratic capabilities, so-called “incorruptible nature,” and bipartisan appeal (outside a handful of overly ambitious rivals), from the opposition party no less, could indeed be a watershed moment in Timor-Leste’s first real change in leadership since gaining independence from Indonesia nearly 14 years ago. In fact, this could indicate a more strategic approach to transition than was previously imagined, albeit an unorthodox one.

Addressing members of the much-reduced incoming government, including his now infamous predecessor, the president of the republic, members of the diplomatic corps, and Timorese citizens via national television, Dr. Rui made what will arguably be remembered as one of the strongest political speeches in modern Timorese history. After paying due respect to the great liberators of the nation, both past and present, the incoming prime minister indicated his intention to use a “new broom” to effectively clean house a bit.

Citing systemic problems with the preceding government, he hit hard at the issues of corruption, wasteful spending by officials, and a culture of nepotism. What was inspiring, though, was in a political system light on policy platforms and practically devoid of accountability mechanisms, he seemed to commit to both. In citing some of the ongoing challenges facing Timor-Leste today, including its enormous dependency on oil, abject poverty, weak education system, and persistent domestic violence, the new prime minister made it clear that he will hold members of government to a higher standard than they are used to. Now of course the question remains, can he actually deliver?

While the top slot is now occupied by a widely respected technocrat, Gusmao will still wield immense power by controlling vast swaths of the state’s coffers in this resource-rich, accountability-poor island nation. The need to continue overseeing the majority of major projects and investment in the country’s infrastructure and resource relations could be an indication that he is in fact not yet ready or willing to give up power, but rather tired of the administration and the compromise that comes with being a prime minister.

The appointment of Dr. Rui may well be an incredibly smart strategy for affording a slow transition while maintaining hard-fought “stability.” After all, in the dusk of the political careers of the likes of Gusmao, Alkatiri, and Horta, their legacies will depend on keeping Timor-Leste stable, and moving from a potential failed state to a successful developing state. In order to do this, however, they need the next generation to complete the task, making this political move incredibly important.

While implementation is bound to remain messy for some time as the new government battles through the muddy mandates that plague the ministries to the point of incapacitating progress, there is a nascent hope that the recent change signals real progress and potential.

Susan Marx is The Asia Foundation’s country representative in Timor-Leste. She can be reached at susan.marx@asiafoundation.org. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/18/timor-2-0-reinventing-a-republic-through-resignations-reshuffles-and-resilience/feed/0Can Malaysia Bring ASEAN Closer to the People?http://asiafoundation.org/in-asia/2015/02/18/can-malaysia-bring-asean-closer-to-the-people/
http://asiafoundation.org/in-asia/2015/02/18/can-malaysia-bring-asean-closer-to-the-people/#commentsWed, 18 Feb 2015 23:31:39 +0000http://asiafoundation.org/in-asia/?p=20215By Herizal Hazri2015 is a crucial year for the Association of Southeast Asian Nations (ASEAN) – particularly so for Malaysia which officially assumed its chairmanship last month. Among other goals, December 31 is the target date for the creation of an ASEAN Economic Community (AEC)...]]>By Herizal Hazri

2015 is a crucial year for the Association of Southeast Asian Nations (ASEAN) – particularly so for Malaysia which officially assumed its chairmanship last month. Among other goals, December 31 is the target date for the creation of an ASEAN Economic Community (AEC) – a single market that would integrate the region’s 600 million people into the seventh largest in the world with a combined GDP of $2.5 trillion.

2015 is a crucial year for the Association of Southeast Asian Nations (ASEAN) – particularly so for Malaysia which officially assumed its chairmanship last month. Photo/Flickr user mohammad khedmati

To manage such high expectations, Malaysia has a huge role to play. It is envisaged to lead the way in guiding the 10 Southeast Asia countries to regional integration as a means of advancing regional stability, building prosperity, and addressing global challenges. While many are sceptical that the ASEAN countries would be able to meet the deadline, Malaysia has commenced the formulation of the “post-2015″ 10-year roadmap for this community-building exercise.

In his welcoming remarks at the National Colloquium on Malaysia’s Chairmanship of ASEAN 2015 in April 2014, Prime Minister Najib Razak emphasized the creation of a “People-Centered ASEAN” and one that would no longer be solely “the domain of the elite and specialists alone.” It sets an optimistic tone, but the challenge of advancing this solidarity under ASEAN among its citizens remains.

Educating the younger generation – over 60 percent of ASEAN’s population is under 35 years old, and after China and India, ASEAN has the world’s third largest labor force – is critical, as is engagement with the respective country policymakers at the ASEAN level. As chair, Malaysia should take this opportunity to promote a “Peoples’ ASEAN” domestically as well as regionally by setting good examples for all members. As the ASEAN agenda has been predominantly elite-driven, there is still a disturbingly low level of awareness among the public about ASEAN’s benefits. The idea of bringing ASEAN closer to the people has to be shared widely if Malaysia is to live up to its theme, “Our People, Our Community, Our Vision.” Ultimately, the sense of commonality needs to be cultivated.

In Malaysia’s growing role as peacemaker in the region as highlighted by Prime Minister Najib, ASEAN’s informal approaches and “quiet diplomacy” are still widely regarded as practical way to help resolve challenging issues such as armed conflicts. One good example of how Malaysia is well positioned to play this role is its recent success in assisting the Philippines and the Moro Islamic Liberation Front (MILF) in signing the Comprehensive Agreement on the Bangsamoro (CAB) to end the armed insurgency in Mindanao.

Foreign Minister Datuk Seri Anifah Aman recently emphasized Malaysia’s push for a moderating approach as a means of promoting regional peace and security during its tenure as ASEAN chair. With Malaysia’s concurrent role as a non-permanent member of the United Nations Security Council, it will be a challenge for Malaysia to juggle protecting its interests and keeping regional peace, and at the same time preserving its relationship with other countries.

While the idea of an integrated region involves a politically cohesive, economically consolidated, and socially responsible community, more focus has been on economic integration in the region. Malaysia has made clear that accomplishing the AEC by the December deadline will be one of its main priorities for its 2015 chairmanship. As reaffirmed by Prime Minister Najib and the Minister of International Trade and Industry (MITI), Datuk Seri Mustapa Mohamed, in an essay he penned, Malaysia is set to address the sensitive issue of protectionism among ASEAN member states. Such an effort would neutralize one of the major challenges that stands in ASEAN’s way of realizing a region characterised by “free movement of goods, services, investment, skilled, labour, and freer flow of capital.”

ASEAN has indeed come a long way in creating favorable conditions for the development of the region. But in order for an ASEAN community to move forward, the people of the region will need to feel a growing sense of common ASEAN citizenship and be more connected to one another. The Malaysian government has an enormous responsibility to popularize the idea of an ASEAN community to its citizens. This is an opportunity for Malaysia to bring together different sectors of society, including the private sector, civil society, and the general public to push forward an inclusive ASEAN community. Ultimately, the success of regional integration will be measured by whether the people of ASEAN feel a sense of “ASEAN-ness” in the integration process.

Herizal Hazri is The Asia Foundation’s country representative in Malaysia. He can be reached at herizal.hazri@asiafoundation.org. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/18/can-malaysia-bring-asean-closer-to-the-people/feed/0Is Phnom Penh Losing its Luster under Rapid Urbanization?http://asiafoundation.org/in-asia/2015/02/18/is-phnom-penh-losing-its-luster-under-rapid-urbanization/
http://asiafoundation.org/in-asia/2015/02/18/is-phnom-penh-losing-its-luster-under-rapid-urbanization/#commentsWed, 18 Feb 2015 23:30:01 +0000http://asiafoundation.org/in-asia/?p=20211By Silas EverettThere were around 32,000 people living in Phnom Penh when the Pol Pot regime was expelled from the city in 1978. Today, there are over 2 million people crammed into Cambodia’s capital, growing by an estimated 50,000 people each year. ]]>By Silas Everett

There were around 32,000 people living in Phnom Penh when the Pol Pot regime was expelled from the city in 1978. Today, there are over 2 million people crammed into Cambodia’s capital, growing by an estimated 50,000 people each year. Its rapid growth comes with increasing pressure on the city for jobs, housing, services, and transportation. As the informal sector in the city swells to accommodate more and more jobless people, it is becoming increasingly difficult to see how economic development alone will take care of the basic needs of residents such as housing, education, and environmental and health infrastructure and services.

Phnom Penh has played the role of economic, political, and social center of Cambodia for almost 150 years. Now, rapid urbanization threatens the city’s architectural heritage. Photo/Flickr user Jonas Hansel

Cities in developing Asia are known to suffer from extreme divisions. In many places, the poor live in informal settlements and slums while the rich live in gated communities and well-serviced condominiums. With urbanization comes the all-too-familiar problems of flooding, gridlocked traffic, trash removal, lack of access to sanitation, insecure land tenure, overcrowding, and air pollution. While the rampant destruction of heritages sites is equally commonplace, it is often overlooked or written off as “collateral damage” of development.

Cambodia in many ways is an outlier. Angkor Wat, a living symbol for the Khmer nation at its height of command almost 1,000 years ago, holds a place on foreigners’ bucket lists, attracting over 2 million visitors last year alone. The quality of Angkor Wat’s preservation is attributed to the Royal Government of Cambodia’s decision in 1993 to combat looting, clear landmines, and turn the site into a world-class tourist destination. Yet even with the influx of foreigners, Siem Reap province, home to Angkor Wat, remains one of the poorest in Cambodia.

Cambodia struggles with its past as much as it does with its current development. Visitors flock to watch the sunrise over Angkor Wat in Siem Reap, while few appreciate the equally stunning sunrise over the less famous Olympic Stadium at the National Sports Complex in Phnom Penh. The complex was sold to a developer in 2001, and today, new high-rise construction projects loom over the stadium, a heaving cornice of concrete. The number of new condominiums alone is expected to increase five times in the next five years. Inspired by Angkor Wat, the Olympic Stadium is a rare piece of Cambodia’s modern architectural heritage. For the thousands of city residents who come to the stadium for their daily morning exercise it provides one of the last open spaces in the city.

Inspired by Angkor Wat, the Olympic Stadium is a rare piece of Cambodia’s modern architectural heritage. For the thousands of city residents who come to the stadium for their daily morning exercise it provides one of the last open spaces in the city.

Phnom Penh has played the role of economic, political, and social center of Cambodia for almost 150 years. The city’s primacy was fostered by the French colonial administration starting in the 1860s. Originally a small riverside market center where the Mekong, Tonle Sap, and Tonle Bassac Rivers converge, by the 1920s Phnom Penh was described as the “Pearl of Asia.” The French colonial administration constructed the Royal Palace, museum, and other works promoting Cambodian culture. Extensive research and archeological projects revived the greatness of the Angkorian era, which the colonial administration offered as a national model to the Cambodian people. Following its independence from France in 1953 to the outbreak of civil war in 1970, under the direction of the late King Norodom Sihanouk, Cambodia experienced a renaissance of architecture and the arts. In the 1960s, Cambodia was the only country in Southeast Asia to have modern, functional architecture, owed in large part to the genius of Vann Molyvann, by far Cambodia’s most prodigious architect and credited with being the father of the “New Khmer Architecture” movement. During this era, Vann Molyvann, leaving the French colonial edifices intact, designed iconic landmarks such as Chaktomuk Conference Hall, the Council of Ministers, the State Palace (now the Cambodian Senate), and of course the Olympic Stadium. Through meticulous city planning, Vann wove environmental considerations into the urban fabric of Phnom Penh, making him stand out among modernists of his time.

From French colonization to Khmer independence, and from Maoist revolution to capitalist revival, Phnom Penh has always appeared to be a canvas on which its rulers have sought to remake their own history through surges of destruction and construction. The Vietnamese-backed government quickly made monuments out of the killing fields and S-21 interrogation center, a stark reminder to Cambodians and the international community of the atrocities committed by Pol Pot. Yet today, the embrace of the French colonial era and Sihanouk’s modernism appears to be less decisive. With foreign funding, the city has carried out rehabilitation projects including the Central Market (Phsar Tmei), and with private funding, rehabilitated several historic buildings in the old city center, including the Khan Daun Penh, for use as hotels, retail stores, and restaurants. The fan-shaped Chaktomuk Conference Hall, managed by the Ministry of Culture, still stands proudly near the Royal Palace. These are treasures of the city, and vivid reminders of Cambodia’s deep architectural heritage.

However, laissez faire city planning might be the greatest threat to the architectural heritage of Phnom Penh. After surviving American bombing, the Khmer Rouge, and the Vietnamese invasion, Vann Molyvann’s National Theatre and the Council of Ministers building were torn down in 2008. As no comprehensive record of these works exist, they have become ghosts of what has been called Cambodia’s “Golden Age.”

The sweet spot for architectural conservation is small and elusive. Finding a balance between individual political and economic interests and collective cultural and social interests is not easy. With an entire generation of intelligentsia wiped out by the Khmer Rouge, reviving collective cultural interests even among the rising middle class will undoubtedly take time and investment.

Fortunately, innovative inroads are being made. The soon-to-be-released film, The Man Who Built Cambodia, which received research and archival assistance from the Vann Molyvann Project and financial support from The Asia Foundation, will help tell the story of architectural icon Vann Molyvann. A crowdfunding campaign for the film offers those who donate $9 the opportunity to get a high-quality digital download of the film before anyone else gets it. It’s a perfect primer before you take a cyclo ride through central Phnom Penh on an excursion guided by Khmer Architecture Tours led by Cambodian architects and students of architecture. But more is needed obviously.

Reaping the full value of Phnom Penh’s heritage requires vision and investment. In the heart of the old city sits Post Office Square, lined by Chinese-style shop houses, restaurants, and a hotel forming an open plaza. From there, you can duck into Van’s Restaurant, converted from the old Indochina Bank building, or enjoy a lunch in the shade of its courtyard. One barely has to squint across the plaza to visualize a pedestrian walk or outdoor shopping street. The possibilities are tantalizingly close and yet, for the time being, AEON Mall, Cambodia’s first mega mall, seems to be capturing the popular imagination.

Silas Everett is The Asia Foundation’s country representative in Cambodia. He can be reached at silas.everett@asiafoundation.org. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/18/is-phnom-penh-losing-its-luster-under-rapid-urbanization/feed/1Trends That Will Shape Asia’s Economic Future (Part 2)http://asiafoundation.org/in-asia/2015/02/11/trends-that-will-shape-asias-economic-future-part-2/
http://asiafoundation.org/in-asia/2015/02/11/trends-that-will-shape-asias-economic-future-part-2/#commentsThu, 12 Feb 2015 00:03:51 +0000http://asiafoundation.org/in-asia/?p=20176By Véronique Salze-Lozac'hIn last week's blog, I highlighted four top trends to look out for in Asia's economic future, including: Asia as the driver of growth, the growing tide of inequality and disparity, Asia's trendsetters, and regional integration and regional fragmentation. Here are four more top trends to watch...]]>By Véronique Salze-Lozac'h

In last week’s blog, I highlighted four top trends to look out for in Asia’s economic future, including: Asia as the driver of growth, the growing tide of inequality and disparity, Asia’s trendsetters, and regional integration and regional fragmentation. Here are four more top trends to watch:

1. Asian connectivity: the big revolution

In the coming years, Asia will experience improvements in different types of regional connectivity: physical, institutional, and people-to-people. Through a more connected Asia, the region can ensure that goods, investment, services, information, technology, and labor circulate more freely.

One consequence of Asia’s growth is rapid and mostly uncontrolled urbanization. Asia is currently home to over half of the world’s megacities and 53 percent of the world’s urban population. Photo/Karl Grobl

Many governments are starting to update their inadequate transport systems. Southeast Asia, for example, plans to spend an estimated $7 trillion upgrading infrastructure, while China intends to build a high-speed railway to Singapore. Yet massive new investments in highways, ports, hydrological structures, power grids, and dry ports will need to be mobilized in all countries to ramp up the regional integration project.

Countries are also moving toward greater institutional connectivity; for instance, through the creation of the ASEAN single window to expedite cargo clearance. Improving institutional capacity is often slow and difficult, however, since it requires harmonizing the standards and policies of multiple countries.

Meanwhile, high internet penetration rates in Asia have created a new wave of “e-empowered” netizens. More Asian consumers, from the bottom to the middle of the pyramid, are gaining access to digital devices and platforms – and the vast knowledge banks, real-time collaboration, and wide reach that they offer.

In Asia as in the rest of the world, the technology and software revolution is definitely “eating the world” as Netscape founder Marc Andreessen wrote in 2011, allowing “technology jumps,” lowering entry costs, and opening opportunities for innovative entrepreneurs with no assets or large technical or investment capacities. Similarly, corporations in retail, health, agriculture, financial services, and other industries will be adding software tools and technologies to their products and services. E-commerce, e-banking, mobile technologies, and much more will change the way business is done in Asia.

2. Asia will be increasingly urban

One consequence of Asia’s growth is rapid and mostly uncontrolled urbanization. Asia is currently home to over half of the world’s megacities and 53 percent of the world’s urban population. Already around 54 percent of China’s residents live in cities, and by 2050, India is projected to add 404 million urban dwellers, surpassing China’s expected 292 million new dwellers. With about 80 percent of the Asia-Pacific region’s economic output generated by cities, urbanization – with its opportunities and challenges – will be a key component of achieving more sustainable and inclusive growth.

Living in cities permits individuals and families to take advantage of the opportunities of proximity and diversity, such as better access to jobs, education and health care. However, the drive for rapid urban growth and efficiency of public services often leads to less equitable urban development. In many cases, low skilled or unskilled migrant workers who have moved to the cities from rural areas cannot find sustainable jobs or affordable housing and are forced to dwell in slums. In 2015 and beyond, the region’s sprawling megacities will witness increasingly scarce space to live – making the value of every square meter continue to rise. According to Indian Architect P.K. Das, in Mumbai, each citizen accesses 1.1 square meters of public green city space, 26 times less than New Yorkers, and much less than the nine square meters recommended by the UN World Health Organization.

According to the ADB, the future prospects for cities in the Asia-Pacific will rely on the management of three interrelated elements: economic sustainability (creating jobs and wealth), environmental sustainability (providing shelters, safe water, clean air, managing waste), and social sustainability (ensuring safety and security, equality of opportunities, inclusion of all groups, and social cohesion).

3. Asia’s human potential

Asia’s management of its human resources will underpin its future development.

According to the International Labour Organization (ILO), there are over 30 million migrant workers in the region, a number that is only expected to increase. 42 percent of these workers are women, as migration in Asia becomes more feminized. The economic contributions of Asia’s migrant workers are significant, since they provide skills, labor power, and services in their host countries, as well as financial remittances, skills, and knowledge once they return to their countries of origin. However, to take full advantage of the opportunities they provide, countries must increase their protection of migrant workers and create more effective governance of labor migration.

Additionally, harnessing the full economic potential of women in the economy is another powerful way to promote economic growth and reduce poverty. The United Nations estimates that the Asia-Pacific economy could grow by $89 billion annually if women were fully integrated into the workforce.

Asia’s capacity to provide quality and broad-based education and training will determine its capacity to take full advantage of its human resources. Today, the net primary school enrollment rate is 92.2 percent, a remarkable improvement compared to 40 years ago, when the region contained two-thirds of the world’s out-of-school children. However, the ADB found that education and human-resource shortfalls still exist at all levels. Developing countries especially will need to improve their training and skills development systems in order to equip graduates with competencies that meet the needs of the labor market.

4. A greener Asia

According to the UNEP, the Asia-Pacific region is now the world’s largest user of natural resources. Its rapid growth has relied heavily on fossil fuel-intensive infrastructure and the exploitation of its natural resource base. This has led to a sharp rise in resource use and emissions in the region – which continues to grow at a faster rate than any other region – as well as high levels of pollution and resource depletion.

If this trend continues, the economic impact could be staggering.

In China, for instance, environmental degradation is estimated to cost the country approximately 9 percent of its GNI, according to the World Bank. At the same time, domestic consumption in Asia has continued to expand, creating unprecedented demand for more energy, clean water, and natural resources. If current rates of depletion continue, competition for resources will intensify.

In Asia as in other parts of the world, more countries are recognizing the need to transition to green growth strategies, incorporating environmental considerations into their national development plans to foster low-emission and sustainable, as well as socially inclusive development. Sustainable management of resources can serve as an important driver of growth, allowing countries to gain a competitive edge and spur greater job creation and prosperity.

Many Asian economies also remain highly vulnerable to changes in the world’s climate, which is expected to cause extreme precipitation, inland and coastal flooding, rising sea levels, heat stress, and famine. The ADB estimates that climate change damage could eventually reduce economic growth in South Asia by 9 percent annually.

These environmental challenges pose significant hurdles to economic growth in Asian countries, and serve as a potential source for heightened tension and conflict in the future.

Policymakers remain skeptical on whether they can implement environmentally friendly policies without causing economic growth rates to drop. Yet the real question is not, “Can growth be more environmental friendly?” but rather, “How could Asia continue to grow if it doesn’t become more environmentally-friendly?”

Véronique Salze-Lozac’h is The Asia Foundation’s senior director for Economic Development Programs based in Bangkok. She can be reached at veronique.salze-lozach@asiafoundation.org. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/11/trends-that-will-shape-asias-economic-future-part-2/feed/1A New Era of Development Financehttp://asiafoundation.org/in-asia/2015/02/11/a-new-era-of-development-finance/
http://asiafoundation.org/in-asia/2015/02/11/a-new-era-of-development-finance/#commentsThu, 12 Feb 2015 00:02:27 +0000http://asiafoundation.org/in-asia/?p=20180By Anthea MulakalaThe global development landscape has changed dramatically in the last 15 years. In 2000, bilateral Development Assistance Committee (DAC) donors (UK, U.S., Japan, France) and multilateral institutions like the World Bank dominated the provision of aid. Today, the face of aid is increasingly Asian. ]]>By Anthea Mulakala

The global development landscape has changed dramatically in the last 15 years. In 2000, bilateral Development Assistance Committee (DAC) donors (UK, U.S., Japan, France) and multilateral institutions like the World Bank dominated the provision of aid. Today, the face of aid is increasingly Asian. On February 12-13 in Canberra, I will join over 200 researchers, academics, and private and government aid practitioners from across Australia, the Pacific, and Asia, to discuss this new aid landscape at the 2015 Australasian Aid Conference, co-hosted by The Asia Foundation and the Development Policy Centre at the Australian National University (ANU).

For new, non-traditional providers, aid is becoming one of the more important tools in the foreign policy toolbox, and while this is increasingly true of traditional donors, non-traditional providers make it more explicit. Conservative estimates indicate that the percentage of total development assistance coming from non-traditional providers increased tenfold, from 8.1 percent in 2000 to 30.7 percent in 2009 ($5.3 billion to $53.3 billion).

This changing aid landscape has enormous implications both for provider and recipient countries. In 2013, the Overseas Development Institute conducted a new research study, “The Age of Choice,” that explores what the new aid landscape means from partner country perspectives, and how countries can evolve their approaches to aid management to make the best use of these new actors and new sources of finance. The research – completed in 10 countries so far, including Cambodia and Timor-Leste, and most recently Vietnam – is revealing in understanding non-traditional development assistance flows. Research found that Cambodia’s budget is about 30-40 percent dependent on external development finance, and about 25 percent of this comes from non-traditional sources. Timor-Leste has seen a dramatic shift in aid dependency – in 2002, the country was heavily aid dependent with grants comprising 86 percent of the budget. In 2012, this dependency declined to 12 percent, largely attributed to the influx of oil revenues. Aid from non-traditional donors has remained fairly low, accounting for about 3.5 percent between 2010 and 2012. 2013 figures (not yet released) are expected to be higher as concessional lending was a factor.

Timor-Leste has seen a dramatic shift in aid dependency – in 2002, the country was heavily aid dependent with grants comprising 86 percent of the budget. In 2012, this dependency declined to 12 percent. Photo/Conor Ashleigh

This month, The Asia Foundation held seminars in Cambodia and Timor-Leste to discuss ODI’s findings. Government officials, development partners, civil society organizations, and representatives from the private sector debated the opportunities and challenges of this new era of development finance for their countries’ future.

Some of the main takeaways were:

Countries welcome choice: The benefits of more funding options outweigh the challenges for the countries ODI studied. In Cambodia as traditional DAC aid has steadily declined, non-traditional assistance, especially from China has risen. In Timor-Leste, China is the country’s 6th largest provider, with the potential to grow. Cuba and Brazil are also emerging actors.

Infrastructure is a priority: The need for infrastructure investment in Asia is paramount. The ADB estimates that about $750 billion is required annually between 2010 and 2020 to meet this need. Participants from Cambodia and Timor-Leste underscored the infrastructure imperative for their countries. Rather than feeling threatened by increased competition, World Bank and ADB participants welcomed the extra infrastructure financing from the largely Asian-led financial institutions like the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (BRICS Bank). However some concern was expressed that limited technical assistance or minimal safeguards from non-traditional partners on large infrastructure projects, may pose investment risk.

Speed matters: While speedy delivery is not a principle in the 2005 Paris Declaration, which lays out principles of good “donorship,” participants at the Timor-Leste roundtable noted that it should be. Partner countries appreciate the less red tape and speedy delivery of their non-traditional providers.

Challenges for civil society: Non-traditional assistance, particularly from non-DAC providers, is increasingly delivered through concessional loans. In Cambodia, the loan to grant ratio has steadily increased over the last decade, with loans comprising about 40 percent of the country’s assistance portfolio today. While this is favorable for the Cambodian government, according to civil society representatives in the seminar, 95 percent of Cambodia’s civil society relies on grant aid from traditional donors. Therefore, as some participants argued, declines in traditional grant aid could threaten their sustainability. In Timor-Leste and Cambodia NGOs worry about the transparency and accountability of new forms of finance and to what extent human rights may be comprised for speed.

Coordination is more an issue for traditional donors than partner countries: Non-DAC providers tend not to participate in donor-led meetings. They prefer to coordinate and negotiate directly with partner governments. This situation is acceptable for most partner governments, though it tends to irk traditional donors who often struggle to navigate the activities of non-traditional actors. In one particularly clear illustration of this, general-secretary of the g7+ Secretariat, Dr. Helder da Costa from Timor-Leste, commented that if you ask for a coordination meeting with China, they will ask you to come to the construction site.

Evolving role for traditional aid: Though it may appear that traditional DAC aid is being squeezed out by new forms of development finance from new actors, there is still a critical role to be played by traditional aid. Within this new landscape, traditional aid is still needed to support governments to create a favorable business climate for private investment, to assist governments to navigate, negotiate, make informed choices, and manage risk in a complex landscape with multiple financing options, and to support civil society to ensure transparency, accountability, and safeguards.

Despite the challenges, partner countries are excited by the opportunities offered by the evolution in development finance. In this “age of choice” they are more firmly in the driver’s seat than ever before.

Anthea Mulakala is The Asia Foundation’s director for International Development Cooperation, based in Malaysia. She can be reached at anthea.mulakala@asiafoundation.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/11/a-new-era-of-development-finance/feed/0Trends That Will Shape Asia’s Economic Future (Part 1)http://asiafoundation.org/in-asia/2015/02/04/trends-that-will-shape-asias-economic-future-part-1/
http://asiafoundation.org/in-asia/2015/02/04/trends-that-will-shape-asias-economic-future-part-1/#commentsThu, 05 Feb 2015 00:41:33 +0000http://asiafoundation.org/in-asia/?p=20154By Véronique Salze-Lozac'hLast month, the International Labour Organization (ILO) announced troubling global trends in unemployment, which is expected to worsen in the coming years. According to its 2015 Employment and Social Outlook report, young workers aged 15-24 are particularly hard hit by the crisis, and Asia is home to the largest number of these young people. ]]>By Véronique Salze-Lozac'h

This is the first of a two-part blog.

Last month, the International Labour Organization (ILO) announced troubling global trends in unemployment, which is expected to worsen in the coming years. According to its 2015 Employment and Social Outlook report, young workers aged 15-24 are particularly hard hit by the crisis, and Asia is home to the largest number of these young people. Similarly, OXFAM’s January briefing note warns against the risk of the huge gap between rich and poor hindering economic growth, undermining democratic institutions, and triggering conflict in the region.

The ILO announced troubling global trends in unemployment, and young workers aged 15-24 are particularly hard hit by the crisis, and Asia is home to the largest number of these young people. Photo/Conor Ashleigh

Indeed, while Asia enters 2015 as the world’s fastest growing region, it is also experiencing new social tensions and economic vulnerabilities. As the international community defines the post-2015 Sustainable Development Goals (SDGs), there is a general agreement that to accomplish higher levels of development, Asian economies have to achieve a more inclusive and sustainable growth.

To ensure that this century will indeed be the “Asian Century,” the region will need to confront many challenges and manage ongoing trends. Here are four to look for:

1. Asia as the driver of growth

The good news is that Asia will continue to be the driving force in world economic growth. In 2014, China became the world’s largest economy in purchasing power parity (PPP) terms, overtaking the United States for the first time in history. The ADB forecasts that Asia’s per capita income could rise six-fold in PPP terms to reach Europe’s levels by 2050. Overall, the emerging Asian economies are expected to grow by 6.9 percent per year from 2014 to 2018.

Underpinning economic growth in Asia is not only the rise in domestic demand, particularly for middle-income countries such as Thailand and Malaysia, but also an increase in foreign investment in less developed countries such as Cambodia, Laos, Myanmar, and Vietnam.

Asia is also looking more inward, integrating Asian regional value chains and producing products for domestic consumers. The challenge will be to sustain growth rates and move countries toward and beyond the middle-income level.

2. The growing tide of inequality and disparity

Both inequalities within countries as well as disparities across economies are threatening the long-term growth prospects of Asia.

The gap between Asia’s rich and poor has widened considerably over the past 20 years. According to the latest Knight Frank wealth report, over the next decade Asia will overtake Europe in terms of its billionaire population (especially in China, India, Indonesia, and Vietnam), with a forecasted 66 percent growth in the number of the ultra-high-net-worth individuals.

While some inequality can help promote investment by fostering the accumulation of capital in the hands of a few entrepreneurs, too much inequality implies reduced economic mobility that can lead to misallocation of resources and to social and political unrest. The challenge will be to guarantee greater economic opportunities for low-income populations to achieve more inclusive and balanced growth.

3. China and India: Asia’s trendsetters

China and India are defining factors in Asia’s overall economy, and as emerging superpowers, both are now determined to exert more influence in the region. However, over the longterm, China and India’s growth outlook is still uncertain, as is their capacity to implement policy reforms that will help them overcome their current weaknesses.

According to the ADB, India is forecast to grow by more than 6 percent in 2015-16, giving it an even greater capacity to create a dynamic South Asia. A new government under Prime Minister Modi is moving to enhance its stature in global politics and play a major role in integrating South Asia – the region’s least integrated bloc. Meanwhile, China is determined to play a more active role in financing projects in the region, as shown by its role in spearheading the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB).

Given the importance of China and India, Asia’s fate will depend on their capacity to address their numerous social, environmental, political, and economic challenges. These include the recent decline in exports caused by the slowdown in the U.S. and Europe, as well as weaknesses in their financial sectors, poor local government finances, and real estate vulnerabilities. Additionally, both countries will need to confront the uneven development and rapid urbanization that have accompanied their impressive growth rates.

4. Regional integration and regional fragmentation

Ongoing regional cooperation and integration will further solidify Asia’s position as the driver of global growth. On trade, energy, water, food security, and climate change, the cost of non-cooperation is gradually becoming clear to the governments and elites of Asia. Countries will find that stronger regional economic cooperation, including through SAARC in South Asia and ASEAN in Southeast Asia, will be key to achieving more equitable and inclusive growth.

Through integration, consumers will enjoy greater choices, better quality, and lower prices with goods from neighboring countries. A recent study, co-produced by The Asia Foundation and CUTS International, found that intra-regional tariff reduction would lead to an approximate gain of $2 billion a year in welfare for South Asian consumers.

However, the risk of regional fragmentation is also increasing, spurred by rising nationalism and tensions between countries that threaten the emergence of an “Asian identity.” There is also a proliferation of bilateral agreements, lack of real commitment to regional integration, risk of inefficiency, weak political support at the national and subnational levels, and resistance from companies that have no desire for a freer trade environment.

In next week’s blog, I will outline four more trends, starting with connectivity: the big revolution in Asia.

Véronique Salze-Lozac’h is The Asia Foundation’s senior director for Economic Development Programs based in Bangkok. She can be reached at veronique.salze-lozach@asiafoundation.org. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/02/04/trends-that-will-shape-asias-economic-future-part-1/feed/2Obama’s Visit to India Signals Rapidly Evolving Relationshiphttp://asiafoundation.org/in-asia/2015/01/28/obamas-visit-to-india-signals-rapidly-evolving-relationship/
http://asiafoundation.org/in-asia/2015/01/28/obamas-visit-to-india-signals-rapidly-evolving-relationship/#commentsThu, 29 Jan 2015 01:03:52 +0000http://asiafoundation.org/in-asia/?p=20115In Asia editor Alma Freeman caught up with The Asia Foundation's India country representative, Sagar Prasai...]]>On his three-day visit to India, President Obama became the first U.S. president to attend the annual Republic Day parade with Prime Minister Narendra Modi, in what many are calling a sign of strengthened relations between the world’s largest democracies. In Asia editor Alma Freeman caught up with The Asia Foundation’s India country representative, Sagar Prasai, from his office in Delhi for his perspective on what this means for U.S.-India relations, regional integration, and Prime Minister Modi’s push for greater foreign investment.

Thousands of spectators braved the chilly rain to attend Republic Day celebrations on Monday. How do you think Obama’s visit was received by the public overall?

The Republic Day Parade is a nationally televised event in India. For most Indians, it is a sight that inspires an assuring sense of nationalism, symbolizes the country’s military and economic progress, and allows a moment to revel in state-produced pomp. Coming out of a fairly protracted antagonism of the cold war years, the U.S.-India relationship has evolved very quickly since the 1990s. Most Indians who came of age then don’t even recall India’s “anti-American” past and most Indians born after the 1990s are subsumed by the power of American cultural symbols and newfound consumerism that draws them ever closer to all things American. In a country where the youth make up the majority, embracing the new has become as easy as forgetting the past, and President Obama’s presence in the Republic Day parade for all intents and purposes symbolizes that transition in the public psyche. The story of the growing convergence in economic and geopolitical interests of the two countries may or may not matter to the public, but the idea of becoming U.S.-friendly does.

Both leaders spoke about the importance of a global partnership and India’s role in ensuring security and peace. What do you see as the biggest areas of potential for India in a stronger relationship with the U.S.?

India’s growing economic weight and military power needs a purpose and a position in global politics. For India, a stable neighborhood, a secure Indian Ocean, deeper economic integration with countries in the Pacific Rim, and increased U.S. investment in Indian manufacturing have become key geopolitical deliverables in the near term. For the U.S., India can become a dependable security partner in an essentially unstable region, a fast-growing market for high-value U.S. exports, and a geopolitical counterweight to the growing power of China. As long as the U.S. remains ready to promote India’s geopolitical interest, India is likely to oblige on all three counts of U.S. interest in India. This partnership has tremendous potential but the pace of delivery on both sides has to match the rhetoric.

Obama ended the visit with a pledge of $4 billion in investments and loans, seeking to release what he called the “untapped potential” of a business partnership with India. Since his inauguration, Modi has pushed for a new deal for foreign investors, easing procedural obstacles, even creating a one-stop portal, “Make in India” to facilitate. What do you see as the biggest challenges that Modi faces in pushing this forward?

U.S.-India trade currently hovers around $100 billion; the $4 billion investment is not a significant amount but it signifies the United States’ will to promote trade and investment in India. “Make in India” may move faster in protected sub-sectors such as defense than in the open market. India still needs to do much more in regulatory reforms – it currently ranks 142nd on the World’s Bank’s “Ease of Doing Business Index,” and its infrastructure needs serious upgrading before it can truly sell “Make in India” to the open market. I would say energy is India’s biggest challenge. Even as the two countries were able to “seal the deal” on civil nuclear cooperation on Sunday, a number of issues need to be resolved before U.S. nuclear power plants in India are able to supply the amount of energy that India’s ambitious growth plan demands.

In a blog piece about Modi’s whirlwind visit to the U.S. in September, you wrote that: “It is difficult to imagine that India’s claim on the high seat of global politics will be recognized by the rest of the world without India being able to take care of the problems in its own backyard effectively.” South Asia remains the least integrated regional bloc. What is India under Modi doing to strengthen its role in the region, and what are the major sticking points that keep it from integrating more successfully?

The biggest change since Modi’s arrival has been that India has taken a much more open and sincere stance on the regional integration issue. The regional integration agenda has historically suffered from limited political will, poor connectivity infrastructure, and lack of integration institutions. Now that the political will appears to have evolved, work on the other two fronts requires a significant ramping up. Beyond the generic elements, Indo-Pakistan relations are an important factor in regional integration in South Asia. Pakistan is going through a soul searching of its own as well. What to do with political Islam in Pakistan is a Pakistani as well as an Indian question. The two countries are still reluctant to take the obvious steps to improve relations but are playing with the idea of a normalized relationship more sincerely than before. If the Indo-Pakistan piece of the puzzle falls in the right place, South Asian integration becomes a matter of planning and implementing rather than wishing and dreaming.

The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

]]>http://asiafoundation.org/in-asia/2015/01/28/obamas-visit-to-india-signals-rapidly-evolving-relationship/feed/0Asia’s Cities Poised to Lead in Climate Change Adaptationhttp://asiafoundation.org/in-asia/2015/01/28/asias-cities-poised-to-lead-in-climate-change-adaptation/
http://asiafoundation.org/in-asia/2015/01/28/asias-cities-poised-to-lead-in-climate-change-adaptation/#commentsThu, 29 Jan 2015 01:02:05 +0000http://asiafoundation.org/in-asia/?p=20123By Toral PatelWith support from the Rockefeller Foundation's 100 Resilient Cities challenge, a number of cities across Asia are beginning to confront the impacts of climate change. Cambodia's capital, Phnom Penh, recently selected as one of Resilient Cities' newest member cities and home to 1.5 million people, is one. Due to its low elevation and proximity to the Mekong River...]]>By Toral Patel

With support from the Rockefeller Foundation’s 100 Resilient Cities challenge, a number of cities across Asia are beginning to confront the impacts of climate change. Cambodia’s capital, Phnom Penh, recently selected as one of Resilient Cities’ newest member cities and home to 1.5 million people, is one. Due to its low elevation and proximity to the Mekong River, Phnom Penh is highly vulnerable to the effects of climate change, particularly heavy monsoons rains which can create disruptive urban flooding, while changes in precipitation patterns and increasing saltwater intrusion adversely affect the city’s water supply and coastal ecosystems.

Due to its low elevation and proximity to the Mekong River, Phnom Penh is highly vulnerable to the effects of climate change, particularly heavy monsoons rains which can create disruptive urban flooding. Photo/Flicker user Chun Yip So

Proximity to rivers and coastlines increases exposure to climate-induced hazards in many mega-cities like Bangkok, Dhaka, Ho Chi Minh City, and Manila. Exposure alone, however, is not what makes these and other Asian cities vulnerable. Rather, it is their low capacity to adapt to new and existing hazards.

Rapid rates of population growth and urbanization accompanying economic growth in the past decade have contributed to staggering deficiencies in urban infrastructure and basic service provision across Asian cities. Phnom Penh, for instance, faces a long legacy of underdevelopment, and lagging investments in critical storm water, drainage, and transportation systems have resulted in these public services being strained to a near breaking point. Seventy percent of the city’s energy is imported, and 10 percent is supplied from two hydropower plants that are barely enough to meet electricity demand during the dry season, even at peak output. Over the last few years, a combination of foreign aid and private and public investment has enabled incremental upgrading of Phnom Penh’s antiquated and often overburdened systems, but the city remains unable to cope with day-to-day strains on its infrastructure, much less the more extreme rains and flooding as a result of climate change.

In addition, in Phnom Penh and throughout Asia, millions of urban dwellers live in poor quality housing in informal settlements, lacking the infrastructure and services that would allow them to cope with climate change impacts. While urbanization rates vary widely by sub-region, the expected urbanization rates across Asia will reach 50 percent in 2026. A World Bank report on Asia’s coastal megacities concluded that low-income and marginalized communities are among the most vulnerable: these groups often live in low-lying areas such as floodplains, work in the informal economy, and lack the assets to move to less vulnerable areas. The weak capacity to adapt means that increasing floods, more severe storms, changing precipitation patterns, water scarcity, and rising sea levels associated with climate change could have devastating impacts for urban populations. These impacts are also emerging far from coastal areas in places like Mongolia. Despite its wealth of natural resources, the country faces a severe water scarcity and quality crisis. Its rapidly growing capital, Ulaanbaatar, may face a water shortage as early as 2015. Those living in the city’s ger districts, unplanned areas without access to basic public services, are at particularly high risk.

In a departure from previous Intergovernmental Panel on Climate Change (IPCC) assessment reports, the fifth and most recent report emphasizes the potential for city governments to play a major role in responding to climate change. Adaptation to climate change is an adjustment in natural or human systems in response to actual or expected climatic impacts, according to the IPCC. The unique concentration of people and climate risks in cities provides significant scope for action.

First, municipal governments are well positioned to design adaptation processes that engage local stakeholders, are closer than national governments to the citizens they serve and thus able to be more responsive to their needs, and are integrated with local policy priorities and frameworks. Second, they often have jurisdiction over areas that are critical to climate change adaptation, from land-use planning and zoning to water supply and waste management. Reducing basic service deficits and building resilient infrastructure systems at the urban scale can significantly reduce vulnerability to climate change. Urban adaptation can also enhance a city’s economic comparative advantage by making cost-effective investments in compact, connected and coordinated growth. Considering that Asia’s cities are key drivers of national economic growth, urban climate adaption is an imperative.

Low levels of technical, fiscal, and managerial capacity among municipal governments in developing countries, however, make it difficult for cities to effectively manage climate-related risks. Lack of awareness among urban officials regarding both the nature and magnitude of risks, such as flooding or rising temperature, is also an issue. Over the past decade, a number of private, non-state, and intergovernmental actors have begun to fill these capacity and awareness gaps by providing support for climate adaptation planning and implementation processes in cities. The Asian Cities Climate Change Resilience Network (ACCCRN) initiative, funded by the Rockefeller Foundation, provided support to 10 cities across India, Indonesia, and Vietnam to develop, test, and demonstrate practical climate adaptation strategies.

On the whole, however, international funding mechanisms to support urban climate adaptation in low- and middle-income countries fall significantly short of meeting the actual costs of adaptation. Estimated costs remain imprecise, but are in the range of tens of billions of dollars per annum globally.

There is a need for greater attention on climate change adaptation at the urban scale, especially to maintain Asia’s growth as the world’s fastest growing region and home to over half of today’s “mega-cities.” Given that climate change adaptation and effective local development go hand in hand, development assistance can play a role in supporting adaptation by reducing the underlying social and economic drivers of vulnerability in cities. Several bilateral and multilateral development aid agencies have embraced the idea of mainstreaming climate adaptation into development planning and processes. However, funneling donor funds down to the urban scale and effectively integrating these two agendas in practice remains a challenge.

Toral Patel is a program associate with The Asia Foundation’s Environment Program, based in San Francisco. She can be reached at toral.patel@asiafoundation.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.